Wednesday, October 12, 2011

The former chief executive officer of defunct Paterson-based Suprema Specialties Inc. has filed a motion to overturn his 15-year prison sentence, blaming his attorney for failing to properly investigate mob-influence in the fraud that wrecked the defunct cheese manufacturer.

Mark Cocchiola, who is serving his sentence in a Lisbon, Ohio, federal prison, alleges in a lawsuit filed in U.S. District Court in Newark that his attorney, Lawrence S. Lustberg, offered insufficient evidence in court that the massive scheme to dupe banks and investors with fake sales at the company was actually a Mafia-run "bust-out," or effort to seize control and loot the company.
Prosecutors said Cocchiola, of Englewood Cliffs, clearly knew of the fraud at Suprema and eventually managed the scheme, in which the conspirators faked sales of $568 million to secure a revolving bank loan of $99 million and to persuade investors to back a secondary public offering that raised $41 million.

The back story

Started in 1983 by Mark Cocchiola and his brother-in-law, Suprema Specialties Inc. manufactured cheese under the Supreme and Di Avellino brands for customers that included Sbarro, the global chain of mall-based Italian restaurants.
The company's rapid sales growth turned heads and Fortune magazine in 2000 called it one of the fastest-growing businesses.
But the sudden resignation of two top executives in December 2001, shortly after a secondary public offering raised $41 million, prompted an investigation by the Securities and Exchange Commission. The FBI raided Suprema's offices in January 2002.
The company went into liquidation in March 2002, and Cocchiola and Chief Financial Officer Steven Venechanos were indicted in 2005 on charges of creating massive fraud, generating millions of dollars of sham sales to dupe banks and investors.
Both men were convicted in 2007.

A federal jury convicted Cocchiola and the company's chief financial officer, Steven Venechanos, in April 2007 on charges of fraud and conspiracy at the company, which collapsed in 2002.
Cocchiola, who denied the government's accusations, argues in an Oct. 4 motion to vacate the sentence that he didn't get a fair trial because Lustberg, of Newark, failed to properly pursue the "bust-out" argument.
"Mark Cocchiola was prejudiced by his counsel's failure to conduct an adequate investigation," the motion says. If he had, the papers say, "there is a reasonable probability that … the outcome of the trial would have been different."
Lustberg declined to comment.
Cocchiola also argues that Lustberg failed to call several witnesses who could have rebutted the government's arguments, including two who would have helped contradict part of the testimony by Arthur Christensen, the company's controller and a key prosecution witness. Christensen, who later pleaded guilty to securities fraud, testified that Cocchiola was aware of, and involved in, the fraud, the motion says.
Cocchiola in 2008 appealed his conviction on the grounds that the court wrongly excluded expert testimony and gave a "coercive instruction" when the jury said it was "hopelessly deadlocked."
He also sought a new trial that same year, arguing there was newly discovered evidence, including evidence that "organized crime had infiltrated Suprema." Both appeals were denied.
Lustberg, in his opening statement in 2007, stated that he would "prove" that the fraud was "an old-fashioned Mafia bust-out."
Lustberg, said "bad people'' infiltrated the company, looted it, and ran it into the ground. Key among them, he said, was Jack Gaglio, who owned four companies that were Suprema's biggest customers. Gaglio pleaded guilty to securities fraud in the case.
Cocchiola's court papers said an expert witness, Frederick T. Martens, was ready to testify how a typical bust-out works: Organized crime inserts a someone into the business or "compromises" a company officer, falsely inflates sales and uses the inflated figure to get loans, which are then stolen before the company files for bankruptcy.
Martens also was prepared to testify that "Gaglio was involved in organized crime and that his operation" was controlled by a Detroit organized crime family, the papers say.
But U.S. District Judge Stanley R. Chesler refused to allow the testimony and Lustberg failed to properly argue that it should be included, Cocchiola said. He added that Lustberg never "proved" the bust-out theory, as he had promised to the jury.
"Without Mr Martens' testimony, Mr. Cocchiola's defense was gutted," the former CEO said.
Lustberg's failure to make the arguments stemmed in part because he did not know all the available evidence of a mob bust-out because he had "conducted an inadequate pre-trial investigation," Cocchiola says.
In particular, Lustberg did not find out until after the trial that "organized crime-controlled companies" with ties to another defendant had bought, or tried to buy, Suprema's assets in the bankruptcy sale.